Case Law Summaries

Powder Hollow Limited Partnership I v. Powder Hollow Associates

• Opinion Date: November 19, 2001
• Real Property Law
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USE AND OCCUPANCY; DAMAGES—A contract buyer that occupies the subject property for a long time before its contract is held to be unenforceable may have to compensate its seller whether those damages are liable as use and occupancy fees or are based on some other theory to avoid unjust enrichment.

In prior litigation, a contract of sale for the purchase of approximately 483 acres of land was held to be unenforceable and was rescinded on equitable grounds. The matter was remanded to Chancery Division to determine the monetary claims of the parties with respect to the contract deposit and any credits and offsets as well. The contract included a contingency that was to last until the New Jersey Department of Transportation made its determination about the location of a highway interchange in the area. The contract buyer had actual possession and control over the property for four years until the determination was made and then for seven years thereafter when the contract was terminated. The lower court made an award to the property owner based upon “use and occupancy” damages. The contract buyer appealed, arguing that based upon some old cases, “turning on the lack of a landlord-tenant relationship in a real estate transaction, ‘use and occupancy’ damages could not be charged against them.” The 1909 case took the proposition that a seller who could not deliver title to its buyer, a contract purchaser in possession of residential property, could not recover for use and occupancy of the residential property. A 1935 case did not allow “use and occupancy” damages for possession of residential property under a purchase contract. A 1964 case disallowed similar damages on the failure of the buyer to properly pay the purchase price for some land. The Appellate Division felt that these old cases “were undergirded by traditional principles of equitable ownership, but it did not consider those cases “binding or current authority” in a case such as the present one where a large tract of property ... is involved for proposed commercial/industrial use and the contract was in effect for such a long period of time.” It held that whether the damages were labeled as “use and occupancy” or based on some other theory, “the sellers are entitled to just compensation to prevent an injustice or unjust enrichment. Quite simply, equity will not allow contract purchasers to tie up property for such a long period of time without some form of compensation.”

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